The Tiger and Dragon Tussle Over Afghan Resources

Via The Financial Times, a look at the resource race in Afghanistan which pits India against China.  As the report notes:

“…Unlikely as it may seem, war-torn Aghanistan is emerging as a battlefield in a quite different sort of conflict – the fight over natural resources between China and India.

The poverty-stricken country is said to be sitting on a largely untapped treasure trove of minerals, including copper, iron, ore, gold, lithium and previous gems stones, worth an estimated $1,000bn. While the war makes it difficult to imagine how any investor would commit the billions of dollars that would be needed to exploit even a fraction of these resources, that is not stopping China and India from staking out the ground.

India, already a major donor to the Afghan reconstruction effort, is pulling itself up to the table hoping for a chunky slice of the mineral resource cake after China’s successful grab of the African resource market, implemented before New Delhi even began thinking about such a strategy.

A famous source of lapis lazuli in ancient times, but only sporadically mined, Afghanistan has only now discovered the sheer extent of its mineral wealth through a survey conducted by members from the United States Pentagon, State Department and US Geological Survey working in conjunction with officials from the Afghanistan Ministry of Mines.

Carried out as part of a broader effort to help the Afghan government exploit its natural rescources and develop its international business relations, the survey indicated that Afghanistan had iron ore assets worth around $421bn and $273bn in copper deposits.

“It’s certainly potentially good news, especially for Afghanistan,” Pentagon spokesman Colonel David Lapan told Reuters when the survey resulrs were published last week. “If we can assist the Afghans in developing these resources, it certainly has the potential for adding a lot to their economy.”

Only a day after the Pentagon affirmed the scale of land-locked Afghanistan’s mineral fortune, New Delhi, dubbing itself Kabul’s ‘natural ally’, arranged for a meeting between the mining ministers from both sides. Officials and geologists from Kabul are coming to India next month for further discussions.

India, which has bitter memories of living with Afghanistan under Taliban-rule, is already providing more than $1bn of aid to help back the Afghan government of Hamid Karzai, and its companies are now helping critical infrastructure – from a 200km highway to telecoms and power transmission lines.

Afghanistan has indicated that it would welcome Indian companies, especially steelmakers, to extract iron ore and set up steel units to help provide badly needed employment opportunities for the local population.

But while Indian and Afghan officials engage in bilateral jaw-jaw, Chinese firms are already gobbling up prime minerals assets. Two Chinese firms have committed themselves to a $4 billion planned investment in the vast Aynak copper mine, south of Kabul, in what would be the biggest non-military foreign investment so far in the country.

That’s bitter blow for Indian companies notably Hindalco, an industry leader in aluminium and copper, which faces its own 15 per cent annual shortfall in copper ore.

Adding to the complexities for India, most of the deposits are close to the Taliban-controlled Pakistan border, which wouldn’t be the most comfortable place for Indian companies to work.

But for all the diplomatic niceties with India, Afghanistan isn’t closing doors to other potential partners, with Afghan officials travelling to London for a June 25 one-day road show to tout its mineral wealth to global mining companies, and other interested parties.

For India and China, the next big round of the match is likely to focus on central Afghanistan’s remote mountainous region of Hajigak, which holds an estimated 1.8bn tons of high quality iron ore – said by Afghan mining officials to be Asia’s largest untouched iron deposit. India and China are both likely to vie for this prize when it opens for international bidding later this year. Even with the war in the headlines, the miners will be there to stake their claims. A hard hat anyone?”

This entry was posted on Wednesday, June 23rd, 2010 at 10:54 am and is filed under Afghanistan, China, India.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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